RALEIGH (April 20, 2012) – Unemployment rate dropped to 9.7 in March, a 0.2 drop from February, according to new labor market data released by the Division of Employment Security. Unfortunately, this apparent improvement masks several troubling trends in the labor market, including falling labor force participation and the emergence of job growth in high-wage and low-wage industries, but virtually none in middle-wage industries long associated with middle class prosperity.

Last month’s drop in the jobless rate is due almost entirely to a 7,852-person reduction in the labor force, the number of prime-age workers who are either employed or looking for work. This troubling drop suggests that the number of discouraged workers—those who drop out of the labor force after searching unsuccessfully for work for 12 months or more—is growing.

“Additionally, we see an even more disturbing trend: the creation a two-tier labor market,” said Allan Freyer, Public Policy Analyst with the NC Budget & Tax Center, a project of the NC Justice Center. “In this type of market, the industries seeing the most growth either pay very high wages or very low wages, while middle-wage industries—the traditional pathways to middle-class prosperity—see stagnation or significant job losses.”

On the high-wage end of this two-tier labor market, Financial Services pays $1,158 per week, and has seen 1,600 in job growth since February and 1,400 over the past year. On the low-wage end, the two industries with the most job growth include Trade, Transportation & Utilities – which pays $716 per week and has seen 1,000 jobs created since February and 11,400 since March 2011 – and the Leisure and Hospitality industry, which pays even less ($338 per week) and has seen 1,300 jump since February and an overall increase of 4,800 jobs since last March. Taken together, these industries account for 91 percent of all jobs created in the state since February.

During the same period of growth in these high- and low-wage industries, the state has also seen stagnation and job losses in middle-wage industries like Manufacturing, which pays $1,016 per week and saw an increase of just 700 jobs last month (only 3,000 over the year). Similarly, Professional and Business Services – which pay $966 per week – dropped by 1,300 in February and have seen just a 6,700 increase since March 2011. Government jobs – which pay $860 per week – dropped by 1,000 last month.

“While the economy is generally improving, the fact that North Carolina is seeing the most job growth in high-wage and low-wage industries suggests the development of a two-tier labor market, with high-skilled workers able to find high-wage jobs and low-wage workers able to find low-wage work, but with little in between,” Freyer said. “Without middle-skill and middle-wage jobs, there is significantly less opportunity for low-wage workers to achieve middle-class prosperity.”

"In order to see the kind of labor market improvement that will benefit all North Carolinians, it is critical that we remain focused on good, quality job creation,” added Alexandra Forter Sirota, director of the NC Budget & Tax Center.